Investing in SCPI via life insurance: a good idea?

Investing in SCPI via life insurance: a good idea?
(Photo credits: Unsplash - Chris Barbalis)

(Photo credits: Unsplash – Chris Barbalis)

Real estate investment companies (SCPI), with a distribution rate of 4.45% in 2021, appeal to investors attracted by the return on this investment as well as by the tangible nature of real estate. Collection therefore started to rise again in 2021 after a significant drop in 2020 due to the health crisis. It is not uncommon for individual investors to want to invest in SCPIs via life insurance, an investment also particularly appreciated by the French. Do you plan to buy SCPI shares from your life insurance contract? Are you hesitating with direct purchase? Operation, advantages, disadvantages: discover in this article all you need to know about investing in SCPI via life insurance to make the right choice.

How it works ?

There are two ways to buy SCPI shares. The first solution, the best known and the one that comes to mind first, is the direct purchase of shares from your banker or wealth management advisor or directly from the management company. But it is also possible to invest in SCPI via its life insurance contract. Indeed, life insurance is an envelope that allows you to invest in a fund in euros and/or in units of account or UC. These unit-linked units enable investors to invest in the equity market (via shares, traditional UCITS, ETFs, or even structured products), but also in the commodities market (via ETFs for example), as well as in the real estate market via SCPIs, OPCIs, SCIs, etc.

Be careful however, this is not systematic. In fact, you can only invest in SCPIs through your life insurance contract if it includes this type of unit-linked support. Not all life insurance contracts allow you to invest in SCPIs. In addition, those who offer it have a limited range of SCPIs, more or less extensive depending on the contract. If you specifically want to invest in a particular SCPI, check that these are accessible from a life insurance contract and which one or which distribute them.

What advantages?

The first advantage of investing in SCPI via life insurance is the accessibility and simplicity with which you can invest. No need to turn to a wealth management advisor or a management company, you can invest very easily from a versatile and hyper-accessible investment, especially if you take out life insurance online. A few clicks will allow you to select one or more SCPIs from your unit-linked supports.

Another advantage: liquidity. Investing in SCPIs is not necessarily very liquid and unitholders may face difficulties in the event of resale on the secondary market. If he does not find a buyer quickly, he will either have to wait or lower his price. However, with the investment via a life insurance, this disadvantage is erased since the contract is concluded with the insurer. You can therefore resell your SCPI units more easily by selling off your corresponding UC line.

Finally, investing in SCPI via its life insurance contract allows you to position yourself on the stone-paper while benefiting from the tax advantages of life insurance, and there are many of them. First, beyond 8 years of detention of the contract, an abatement of 4,600 € for a single person and 9,200 € for a couple is applied each year to the gains from redemptions. In addition, if the outstandings are less than 150,000 euros for a single person and 300,000 euros for a couple (all contracts combined), then the gains are taxed at only 24.7% (flat-rate levy in discharge of 7.5% + social contributions of 17.2%) against the flat tax of 30% for contracts of less than 8 years. In addition, life insurance also allows you to benefit from tax advantages in terms of inheritance. Thus, for payments made before the insured’s 70th birthday, the beneficiary receives the funds of the contract without inheritance tax up to €152,500, with a flat rate tax of 20% beyond that, then €31, 25% above €700,000. For payments made after the insured’s 70th birthday, the beneficiary receives the policy funds without inheritance tax up to €30,500. Beyond that, taxation applies according to the scale of inheritance tax. Interest and capital gains on payments after age 70 are fully exempt.

Read also: How to boost the return on your life insurance by taking as little risk as possible

What disadvantages?

But investing in SCPI via its life insurance contract does not only have advantages. First, with this solution, the investor will not be able to take advantage of credit leverage to invest. Indeed, it is possible to take out a mortgage to buy SCPI shares only if the purchase of shares is done directly.

Then, the profitability of SCPIs is reduced by the costs inherent in the life insurance contract (management fees and any entry fees). Even if life insurers highlight the fact that the subscription price in the SCPI is lower than in a direct investment, with a discount of around 2%, it is important to remember that the specific management costs applied to all units of account weigh on overall performance.

You should also know that according to the SCPI and the rules of the insurer, the distribution of the rent paid on the contract can possibly be amputated by a part.

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